Art Uncut actually gets something right shocker!

Our concern is that when individuals and corporations \”shop around\” different countries for the best tax deal, this puts pressure on governments all round the world to lower their tax rates, which results in an ever-dwindling proportion of profits going to governments to spend on schools, hospitals and public services.

Yes, that is the point of tax competition.

Imagine that you couldn\’t bugger off and take the deal on offer elsewhere?

Imagine, for example, that there was only one baker in the country. It\’s bread on their terms or no bread at all. We all do understand that we\’d end up with expensive shitty bread in such a situation.

Or if there was only one employer in town, like say one of the old company towns. We know that the jobs on offer would be badly paid shitty ones or you get to starve.

There\’s even a word economists use to describe this situation: monopoly.

We know that monopolies give shit service at high prices. Why they do this is simply because they can.

And the same is true of governments: monopoly, the inability for people to fuck off elsewhere, means high prices and shite goods and services.

Tax competition, the ability of people and companies to choose among alternative deals is thus a good thing. Just as a multiplicity of bakers or of employers is a good thing.

Do note though, even while Art Uncut have managed to identify the point, they manage to get the meaning of what they\’ve identified completely wrong.

But then that\’s arts graduates for you, eh?

10 thoughts on “Art Uncut actually gets something right shocker!”

  1. Ah, it depends how you define “monopoly”. If it’s a compulsive monopoly, as the term used to mean, yes, you get shit. Not so if it is merely a single supplier in the marketplace. It’s not a problem of there being only one baker. It’s a problem of being forced to eat his bread, which is the problem government has.

    If there’s only one crappy baker, I will eat another product. In fact, since my fridge broke down and I’m too poor to buy a new one, I haven’t eaten bread in months. I’ve also lost a stone and a half and am looking more like a young gazelle every day, but that’s beside the point.

    A single private sector health supplier with no government support coiuld only achieve and maintain that position by offering a good service- not so a State one, which gets the money regardless. Because nobody can make the decision, “they’re so crap, I just won’t pay at all, I’ll take my chances with Old Widow Miggins and her witchcraft”.

    Market forces still work upon Megabread Corporation. They only cease to exist when it becomes the National Bread Board.

  2. Interesting that what concerns them is the “proportion of profits going to governments to spend on schools, hospitals and public services”, when lower taxes would probably result in a greater tax take. Sounds to me that they would never be satisfied until the proportion was 100%.

  3. “lower taxes would probably result in a greater tax take”

    I never like this argument. The reason for cutting taxes is to starve Leviathan, not to feed it.

  4. Ian B – in other words, this is a problem with identifying what a market’s boundaries are, which is a real problem for competition authorities, which are often legally tasked with “ensuring competitive markets” or something. For example, if one company owns all the cinemas in a country, but none of the video rental stores, does it have a monopoly? It does if you look at the market for films shown in cinemas, not if you look at the market for films viewable somewhere, and has even less market power if you look at the market for entertainment (which includes things like going out to pubs).

    But of course also people differ a lot in how they regard markets. A film snob might be willing to pay a lot more to go to a movie shown in a cinema than to watch a DVD at home, someone with a surplus of energy might wish to never go to the cinema because it involves sitting still for two hours, no matter how cheap it is.

    So if a product has very very close substitutes, in most people’s minds, then monopolising only that product won’t bring much in the way of excess gains. If it doesn’t have close substitutes in most people’s opinions, then monopolising only that product can be very valuable.

  5. Ian B makes the point “The reason for cutting taxes is to starve Leviathan, not to feed it”.

    However, the balance that we face here is:
    1. “Do we want government finances to stablise?”
    2. “Do we want government itself to collapse?”

    Being an anarcho-libertarian, I’m happy and indeed prepared for 2.

    There is no politician on the current stage of either of the 3-main political parties who genuinely espouses that the state should be massively shrunk. The only way to cause this to happen is for a combination of ever reducing taxes AND ALSO the inability to sell gilts at a reasonable price to kick the problem into the future.

    While the UK can continue to put things on the national credit card then the “Starve the Beast” strategy doesn’t work. I can’t see a strike on UK gilts at any time in the near future, especially with QE2, 3, 4, etc. as options for inflating away the national debt.

    So, all-in-all, the better option is to move to a position where UK finances are stablised. Given where the UK probably is on the Laffer Curve (i.e. above the threshold where increasing tax rates increases income), then the only way to deal with the problem is to cut expenditure, feed savings into reducing the deficit and also encouraging growth.

    Sexy it isn’t, radical it isn’t, but it’s what needs to be done. George Osborne knows the way to go and also knows that it will be tough which is why he’s planning to take 5-years to balance the books. With a little help from his invisible friend inflation, he might just get there.

    However, this means 5 more years of dealing with the problems arising from stagnant wages and inflation.

    The UK needs more than a little luck, it needs a politician who is prepared to take the necessary steps to cut down government spending at whatever cost so that we can get back to a balanced budget and reasonable growth.

    That is the only way out of the trap.

  6. Well, while the government collapsing might be too much to hope for, it would be nice to see it at least trip over and skin its knees.

    Seriously, the problem here as I see it is this; if you’re not prepared to actually seek less government spending, stop complaining and just suck it up. The purpose of seeking a smaller tax take is to reduce government spending. That doesn’t mean, an anarcho-capitalist paradise or what have you. Just, less spending.

    If that isn’t the goal, it’s not worth arguing about taxes. This whole “lower tax rates will increase the tax take” argument just looks like one of those feeble dishonest arguments like, say, “medicial marijuana”. If you want to legalise drugs say so, don’t come out with this bullshit about marijuana being a wonder drug. It’s dishonest.

    I want lower taxes, because I want the government to spend, and do, less. That doesn’t mean, nothing at all. It means simply less. Like, at this stage of the game FWIW I’m actually quite happy for them to do the Health Service thing; getting rid of that is unfeasible and may not even be a Good Thing right now. But they don’t need to run theatres, for instance, or this ridiculous fucking international sports week thing they’re spending 10 zillions pounds on.

    Less state spending please, funded- or rather not funded- by lower taxes.

  7. “Or if there was only one employer in town, like say one of the old company towns. We know that the jobs on offer would be badly paid shitty ones or you get to starve.”
    In theory you’d be right, Tim. But history shows that the theory can be wrong for generations.
    the workers in Stoke on Trent, St Helens or Detroit were the proletarian aristocracy for nearly a hundred years. Who’s to say the consumer got ripped off when the consumer was obviously prepared to pay extra for the pots, the glass, the cars?
    As for other company towns, theory may not even today have caught up with history. Bourneville, Waterford and Port Sunlight are not notoriously crap towns.

  8. Bourneville, Waterford and Port Sunlight are not notoriously crap towns

    Agreed. However, these were created by enlightened employers who understood that there was not just a master/slave relationship here and that there were advantages to improving the lives of their workers (health, education, employee retention, etc.) in an era where the Master/Servant relationship was still pretty raw and obvious.

    Equally, I would point out that these developments happened in the abscence of government when tax rates were minimal to none.

    The nearest modern equivelent would be the “State” projects of the post-war “new town” development period.

    Let me assure you, “Milton Keynes” is no Bourneville. Not by a long shot.

  9. blokeinfrance, there were lots of employers in Stoke (the pottery business was very fragmented), and I think in St Helens & Detroit.

    Bourneville etc. were close to other cities, and had to comete with them for their workforce away from there. I don’t think they lasted long enough to have a ‘captive’ workforce, and anyway they weren’t far enough away from other employers.

    Bourneville was only founded in the 1890s, and was only 4 miles from Birmingham (and with easy train access), so Cadbury was never a monopoly employer.

  10. these were created by enlightened employers who understood that there was not just a master/slave relationship here and that there were advantages to improving the lives of their workers (health, education, employee retention, etc.) in an era where the Master/Servant relationship was still pretty raw and obvious.

    Or, to put it another way, they were created by religious nutballs (Quakers, generally) who perceived the ideal social model to be benign dictatorship; the kind of “enlightened” men who became Liberal MPs and inaugurated the nanny states we now live in.

    Broon’s “Eco Towns” are but the latest manifestation of the Port Sunlight model; indeed I’ve described the modern anglo-state as “Port Sunlightism”. These men were really not admirable at all; they were merely the precusors of the modern total state which takes away your every freedom for your own good. The model villages and garden cities were merely pilots for the eventual national roll-out of Utopia.

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